Bitcoin is a digital currency that has captured the attention of investors, traders, and even big financial institutions like hedge funds. In recent months, the price of Bitcoin has been moving up and down in a very noticeable way, especially as the next Consumer Price Index, or CPI, report approaches. The CPI report is important because it tells us how much prices are rising in the economy, which can affect how much money people want to put into risky assets like Bitcoin. When the CPI report comes out, it can make markets jump or drop depending on whether inflation is higher or lower than expected.
Many people are now asking if hedge funds are shorting Bitcoin before this report. Shorting means betting that the price of an asset will go down. If a hedge fund shorts Bitcoin, they are basically saying they think the price will fall, and they want to profit from that drop. But is this really happening right now? Let’s look at what’s going on in the market and what the data is telling us.
First, it’s important to understand how shorting works in the Bitcoin market. Hedge funds and other big investors can short Bitcoin in a few different ways. One way is through futures contracts, which are agreements to sell Bitcoin at a set price in the future. If the price drops, the person who sold the contract can buy Bitcoin at the lower price and make a profit. Another way is through options, which give the right to sell Bitcoin at a certain price. There are also leveraged tokens and other financial products that allow investors to bet against Bitcoin.
In the past year, we have seen a lot of activity in Bitcoin futures, especially on regulated exchanges like CME. After the launch of spot Bitcoin ETFs in early 2024, many leveraged funds started increasing their net short positions in CME Bitcoin futures. This means they were selling more futures contracts than they were buying, which is a sign that they were betting on lower prices. The reason for this was not always because they thought Bitcoin was going to crash, but sometimes because they were using these short positions to hedge their long exposure in the spot market. In other words, they were protecting themselves against losses if the price went down.
As of late 2025, the open interest in Bitcoin futures has been fluctuating. Open interest is the total number of outstanding contracts, and it can give us a clue about how much shorting is happening. In November 2025, the open interest in CME Bitcoin futures was in the low-30,000s, which is lower than the peak in late 2024 but still significant. This suggests that there is still a lot of short activity, but it’s not at record levels. The basis, which is the difference between the futures price and the spot price, has also been changing. When the basis is negative, it means that futures are trading below the spot price, which can be a sign of bearish sentiment.
Another thing to look at is the amount of leverage in the market. Leverage means borrowing money to make bigger bets. In the crypto world, leverage can be very high, sometimes up to 100 times the original investment. This can make price moves much more dramatic. If a lot of people are using leverage to short Bitcoin, a small drop in price can trigger a wave of forced selling, which can make the price fall even more. In July 2025, the total amount of money lent for crypto bets had grown to $53 billion, and it was even higher when the market crashed in October. This shows that leverage is a big factor in the market right now.
When we look at the recent price action, Bitcoin has been very volatile. In October 2025, the price dropped sharply, erasing $19 billion in leveraged positions. This was not just a drop in price, but a wave of forced liquidations, where traders who had borrowed money to bet on Bitcoin had to sell their holdings to cover their losses. This kind of event can create a feedback loop, where price weakness triggers more selling, which leads to more price weakness. The same thing can happen on the short side. If a lot of hedge funds are shorting Bitcoin and the price starts to rise, they may be forced to cover their short positions, which can push the price even higher in what’s called a short squeeze.
A short squeeze happens when the price of an asset rises quickly, forcing short sellers to buy back their positions to avoid bigger losses. This buying can drive the price up even more, creating a sharp rebound. In Q3 2025, there were signs of a short squeeze potential as concentrated short positions near $113,000 to $114,000 triggered rebounds. This means that when the price got close to those levels, short sellers started to cover their bets, which helped push the price back up. The key support level for Bitcoin is seen between $101,000 and $110,000, and this area has offered strategic buy-the-dip opportunities for investors who believe in the long-term value of Bitcoin.
Now, as the next CPI report approaches, the market is once again on edge. The CPI report can have a big impact on investor sentiment. If inflation is higher than expected, it could lead to more hawkish comments from the Federal Reserve, which could weaken demand for risky assets like Bitcoin. This could make hedge funds more likely to short Bitcoin, hoping to profit from a price drop. On the other hand, if inflation is lower than expected, it could boost investor confidence and lead to a rally in Bitcoin prices.
Recent data shows that macro pressures have already weighed on Bitcoin. In the past few weeks, Bitcoin’s price has dropped by over 18% from its record high of more than $126,000. At one point, prices briefly fell below $100,000. This sell-off was partly driven by hawkish commentary from the Fed’s Chair Jerome Powell, which weakened demand for spot ETFs. There were also four consecutive sessions of roughly $1.3 billion in net outflows from U.S. spot Bitcoin ETFs, which turned one of 2025’s strongest tailwinds into a near-term headwind. The softer spot demand collided with forced deleveraging, with more than $1 billion in long liquidations at the lows.
Ecoinometrics has warned that the closer Bitcoin’s price stays to the $100,000 level, the greater the risk of a feedback loop emerging, where price weakness triggers outflows from Bitcoin ETFs, which in turn puts additional downward pressure on the spot price. This kind of dynamic can make the market even more sensitive to shorting activity. If hedge funds see that the price is struggling to hold above $100,000, they may be more inclined to increase their short positions, hoping to profit from further declines.
But it’s not just hedge funds that are shorting Bitcoin. Retail investors and other market participants are also active in the short market. The retail footprint in Bitcoin is significant, and this can make market flows more sensitive to sentiment. When retail investors start to panic and sell, it can create opportunities for short sellers to step in. The